However, because of the unique complications involved in applying subsection 88(1) to involuntary or court order dissolutions, this paper will generally assume that the subsidiary is being wound up under the voluntary dissolution provisions of the provides for voluntary dissolution in three sets of circumstances.
For example, if the company has not yet issued any shares, then it may be dissolved at any time by a simple resolution passed by all of its directors.
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Generally, a corporation can only be dissolved under the guise of the authority of the jurisdiction in which it was incorporated.
A dissolution can be achieved in various fashions, including voluntarily, involuntarily, and by means of court order.
If the corporation has issued shares but lacks both property and liabilities, then it may be dissolved by a special resolution of its shareholders.
On the other hand, if it does have property or liabilities, then it may be dissolved by special resolution of the shareholders of each of its classes of issued shares, so long as it discharges its liabilities prior to dissolution.
As well, the outstanding litigation must be the only reason for the delay in obtaining a formal dissolution.
The winding-up corporation must not undertake any activities or acquire any property while awaiting the formal dissolution.
The intent of this report is two-fold: The paper is divided into six sections, including this introduction.
Part II addresses the corporate law issues attached to the winding-up of a corporate subsidiary into its parent; Part III examines the substantive provisions of the rollover and the related corporate tax implications thereof, with particular emphasis on the "bump" rules; Part IV reviews the newest and proposed amendments to subsection 88(1); Part V evaluates the extent to which the rollover achieves three principal objectives, and proposes a number of reforms for improving subsection 88(1); and Part VI provides a conclusion to the paper.
The following analysis of the tax implications of subsection 88(1) is organized into seven parts: eligibility for rollover, general rules, shares of the subsidiary, property of the subsidiary, liabilities of the subsidiary, losses of the subsidiary, and minority shareholders.
The opening words of subsection 88(1) reveal that there are four primary requirements that must be satisfied in order for the rollover provision to apply: taxable Canadian corporations, wind-up of subsidiary, 90 percent ownership and arm's-length requirement.
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